UoB Business Club Breakfast Briefing - December 2016

Thursday 1 December 2016

University of Birmingham Business ClubBreakfast Briefing

‘Valuing your Business’

www.pwc.com

How valuable is your Intellectual Property?IP breakfast seminar

1 December 2016

PwC1 December 2016

Agenda

2How valuable is your Intellectual Property?

•Why value intellectual property (“IP”)?

•What is IP?

•How can you value your IP?

•How can you get the most out of your IP?

•How can you protect your IP?

PwC1 December 2016

Why value IP?


Lending / licensing (media) Fundraising (pharma) Transactional context Corporate restructuring Accounting Understanding value creation / internal decision making

Thinking about what you can do with your IP is more important than value of IP itself!

PwC1 December 2016

What is IP?


Registered Rights• Patents

• Registered trade marks

• Registered designs

• Domain names (quasi-IP)

Unregistered Rights• Copyright and database rights

• Unregistered design rights

• Unregistered trade marks

• Confidential information

• Intellectual Property is a catch-all term to describe a variety of different legal rights.

• Broadly, these rights attach to types of information or ideas, and how they are expressed.

• Multiple types of IP rights can attach to a single product or expression of an idea, as there are overlaps between the different forms of IP.

• IP rights can be split into two groups – registered and unregistered rights.

Intellectual Property

PwC1 December 2016

Example: Mobile Applications


Trade mark (e.g. logo)

Registered Design (e.g. user interface)

Copyright (e.g. source code)

Patent (e.g. surge pricing algorithm in US)

Confidential Information (e.g. pricing)

Database rights (e.g. in location data collected)

PwC1 December 2016

How can you value your IP?


Sale

s ev

olut

ion

Incubation Expansion Maturity / Exit

Value estimate =

reproduction / replacement cost-

adjusted for depreciation and

obsolescence

Cost Approach

Value estimate =

present value of earnings attributable to the asset or costs

avoided as a result of owning the asset

Income Approach

Growth lifecycle

PwC1 December 2016

How can you value your IP (incubation / expansion)?Cost approach


Used where the income from an asset can not be reliably estimated Typically applied to value technology, R&D, software / databases and workforce What would the cost to replace the asset be / how much would it cost to reproduce

the asset? Do we need to adjust for the obsolescence of the asset in question, when

compared with the asset in the market? Identification & quantification of obsolescence is key!

All related costs should be factored in including labour, materials, etc… Need to consider opportunity cost and strategic premium of getting the IPPros Cons

Appropriate for intangibles not generating cash flows, but…

Fails to capture expected returns of the asset

Easy to implement, but… Data not always readily available

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Revenue stream for an asset Royalty rate Tax

adjustmentDiscount

factorNet present

value

Measures the benefit of owning intellectual property as the “relief” from the royalty expense that would otherwise be incurred by licensing the asset from a third party

Common methodology adopted to value patented/unpatented technology and trade names in B2C

Revenue stream must be aligned with IP cash flows and useful life What is the appropriate royalty rate? Qualitative analysis is key! What is the appropriate discount rate? Specific risks of an asset should be

assessed.

How can you value your IP (expansion / maturity)?Income approach – Relief from Royalty


Pros Cons

Easy to implement, but… Judgement is required in royalty rate selection

Captures expected future returns to the owner

PwC1 December 2016

How can you value your IP (expansion / maturity)?Income approach – Residual earnings


Common methodology adopted to value the most important IP in a company

Revenue stream must be aligned with IP cash flows and useful life

What level of profitability do they generate and what are the assets (tangible and intangible) which contribute to its generation?

What is the appropriate discount rate?

Net present value

Contributory asset charges

Adjustment for tax

Discount factors

Revenue and profit (EBIT) for existing customers

Pros Cons

Captures expected future returns to the owner

Difficult to implement

PwC1 December 2016

Understanding value creation


Sale

s ev

olut

ion

Incubation Expansion Maturity / Exit

Growth lifecycle

From idea to seed

• Being agile with your business

• Using mentors to develop the business

• Raising money using angel or VC investors

Early stage

• Attracting and retaining talent

• Scaling your product• Investors who can

bring value

Growth

• International expansion

• Market expansion• Exit readiness

Maturity

• IPO• Acquisitions• Compliance

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Maximising value – Incentivising management


Overview Most effective management incentive plans (MIPs) are

those that allow management to become owners in the business – management and shareholders interests are aligned!

Effective shift in mind set from employee to shareholder.

Payments to management based on shareholder value created.

Forensic approach to current and potential future value of the business supports effective MIP design.Illustration – Binary milestones

Start-up – Initial idea

1

Business angel

2

1st round funding -

VC

3

2nd round funding - PE

4

Time

Shar

ehol

der

valu

e

Key attractions Don’t need an exit strategy – MIP can be based

around binary milestones! Tax efficient MIPs can be designed to fit HMRC

approved schemes (i.e. EMI). Attractive mechanism to retain and reward key people

– particularly early stage businesses where cash flow can be tight!

Valuation key – Don’t give too much away!

What are the key value drivers?

PwC1 December 2016

How can you protect your IP?


IP Strategy

• Important to develop an IP strategy that is specific to your business – consider where the key value in your business lies, and how best to protect this.

Registration

• Consider registering certain types of IP – patents, trade marks and designs.

• However, you should consider the cost of doing so, and in respect of patents and designs in particular, is the time and cost justified in the context of the IP being protected (for example, will the market and the technology have moved on in the two years it might take to achieve the full protection of a patent).

• Register domain names as soon as possible – this is usually a cost effective protection.

PwC1 December 2016

How can you protect your IP?


Practical steps to protect IP other than registration

• Ensure IP isn’t created in the course of employment / another engagement, or using any employer materials.

• Contracts with employees, contractors, suppliers, customers and partners should all form part of the IP strategy of your business, and are equally important as ‘hard’ IP protections. All applicable contracts should make clear IP is assigned and belongs to the relevant business.

• Document your work, and identify the date and who contributed to the creation of it – try and maintain an audit trail where possible.

• Use non-disclosure agreements when disclosing details of ideas or innovations to external consultants or potential financial partners.

• Where practical, include notices regarding the ownership of IP when publishing material.

• Ensure that you are compliant with the scope of any licences that your business relies upon, and review the scope of any licences that you have granted to your IP.

• Maintain the distinctiveness of your IP, and be aware of infringing the IP rights of others.

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2016 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.

Thank you! Questions?

For further information please contact:

Name: Alexey SarvutTel. no.: 0752 528 1399E-mail: [email protected]

Name: Stephen WhitakerTel. no.: 0780 810 7003E-mail: [email protected]

Name: Michael JonesTel. no.: 0784 180 3622E-mail: [email protected]

mailto:[email protected]




Sandy Purewal, University of Birmingham,

Business School

Sandy Purewal, Skills Development Consultant, Careers in Business Email: [email protected]

MBA Developing Leadership Practice 2016-2017

The Programme

5 MBA’s – consultants for a succinct project8 Wednesday afternoons – approx: 100 hours Meet your consultants 4 timesFinal presentation and report - 22nd MarchApply by 7th December 2016

To apply

Email Sandy [email protected]

Deadline for application : 7th December 2016



Sofia Hansrod, University of Birmingham,

Academic Enterprise Manager

Sofia Hansrod – Academic Enterprise [email protected]

The team supports enterprise activities at the University; we advise and work with:

Academics considering commercialisation of their research; Entrepreneurs and academic teams developing new companies; Young high-tech companies as they grow.


Innovation Competition 2016/17Have you collaborated with the University of Birmingham?

The Enterprising Birmingham Innovation Competition has been designed to highlight and reward researchers who have identified a commercial or innovation opportunity, based on their research and have the drive and vision to transform their innovation into a commercial project.1. Most Innovative Idea (for researchers who have an idea with commercial potential)First Prize £20,000 investmentRunners Up Prizes £2,000(Closing date for initial expression of interest 9 December 2016)

2. Most Innovative CollaborationWould you like to win a prize of £5,000 to develop your collaboration?This category rewards academics (and their collaboration partners) who have identified a innovation opportunity based on their research and have delivered their innovation into a company/organisation, yielding demonstrable benefits.

Interested in applying?Email: Sofia Hansrod – Academic Enterprise Manager

[email protected]

Deadline: Monday 9th January 2017



Jessica GillinghamD-Coded Insights,Insights Executive

Jessica Gillingham – Insights Executive

01543 241038

[email protected]

www.d-coded.co.uk

- December 14th 2016

- 10am – 5pm

- Advantage House, Lichfield.

1. Faces

What to expect:

- Dr Paul Ekman- Facial Action Coding

System (FACS)- Micro and Macro

Expressions- How to spot a liar in

the workplace!- Application!

2. Emotions

What to expect:

- 7 Universal emotions

- Brain Areas- Media Validation

Testing Service - Mehrabian’s Pleasure Arousal

Dominance Analysis

- Application!

3. Personology

What to expect:

- Naomi Tickle- Check Yourself

Out!- Application!

‘Personology’ - the assessment of an

individual’s character/personality

from their physical appearance (primarily

the face)

Come Along! Learn more about the science behind D-Coded Insight’s services! APPLY your new found knowledge to your business or industry!

01543 241038

[email protected]

www.d-coded.co.uk

14th December 201610am – 5pm

Advantage House, Lichfield


Ewa TruchanowiczAlta Innovations Ltd,

Business Engagement Manager

BioBrum 2017

Dr Ewa TruchanowiczBusiness Engagement Manager, Alta Innovations Ltd.

[email protected] 414 9252


BioBrum 2017

What is it?A life science event

• Free to attend for selected companies!

• Featuring talks, networking opportunities plus a potential high-value prize!

When is it?16th February 2017

Who do we want?Pre-revenue, life sciences

companies in need of laboratory space and business

development advice

What do we require?Expression of interest by e-mail

An application form will be released by returnThe selected companies will be informed by mid-JanuaryPreview visits to the BioHub can be pre-arranged with Dr Ewa to ensure compatibility

BiobBrum 2017The talksWill focus on;

• Intellectual propertyWhat it is, how to value it and how to protect it

• FinanceReadiness for investment, sources of finance

• Helpful networksThe power of professional networks

• InspirationThe story of a real start-up entrepreneur

The programmeWill provide;

• Practical advice• Stimulating ideas• Funding options

Featuring;IP specialists

Finance gurusInspirational entrepreneur

Presentations from BioIndustry Association and OBN

BioBrum 2017

Dr Ewa TruchanowiczBusiness Engagement Manager, Alta Innovations Ltd.

[email protected] 414 9252


2017 Breakfast Briefings

Themes and dates for 2017 tbc

Workshops:• Family Business Workshop: Succession Planning

(1 March)A workshop designed to address some of the key issues facing Family Businesses in particular, namely, succession planning and financing.

Thank you to our speakers and for your

attention